The bluffer and the bargain

When the rankings that are used to determine free agency compensation came out, Red Sox catcher Jason Varitek was ranked as an “A” level player – the top level. When type A players are signed by another team, the team who loses the player typically gets either the first round pick or second round pick of the team who signs him (let’s call this team “Yankees” in order to simplify things), as well as a pick that is sandwiched between rounds 1 and 2 (referred to as a sandwich pick). In the case where a team signs several type A players, the compensation can be less – the team losing the highest rated player would get the Yankees’ first round pick plus a sandwich. The team losing the second highest rated player would get the Yankees second round pick, plus a sandwich, etc. (More information can be found on MLBTraderumors.com)

One aspect of free agent compensation is that in order to qualify for the compensation, the player’s old team must offer him arbitration, and he must decline (arbitration is a process where each side submit an amount to a panel of arbitrators. The panel chooses one of the amounts as the player’s salary for the next year – they cannot settle on a compromise amount).

The fact that Varitek qualified as a type A speaks to some of the flaws in the system. Varitek will turn 37 next April, and catchers are not the sort of baseball player who age gracefully. The years of squatting behind the player typically catch up with a catcher in his mid 30s, affecting the quality of his play. This is a cruel fact. Add to this the fact that Varitek was coming off a rather lackluster year in which he hit just .220 with 13 homers – by most measures, it was the worst season of his career. Varitek is the captain of the Red Sox and is an emotional leader, so he does have some positives.

The reason why Varitek was a type A player is due to a good 2007 season (the rankings are based on the last two seasons) and a relatively poor group of catchers that he is compared against.

When the Red Sox decided to offer arbitration to Varitek, it seemed like an obvious attempt to bring him back at 80% of his 2008 salary (a player cannot receive a pay cut of more than 20% through arbitration). His 2008 salary was $10.4 million; 80% of that is $8.32 million). It should not have been hard for the Red Sox to win an arbitration case. In fact, it seemed that the smartest thing for Varitek to do would be to accept arbitration. If he declined arbitration, the team signing him would have to forfeit a draft pick to the Red Sox – and also overpay for Varitek (since he does not appear to be worth $8.32M).

Needless to say, I was stunned when Varitek declined arbitration. He now has two options:

1) Negotiate a deal with the Red Sox. It seems difficult to imagine that he’ll be able to negotiate a salary of more than $5 million per year, especially with the Red Sox holding most of the cards (see option 2)

2) Sign a free agent contract with a team willing to forfeit the draft pick and pay him the money he ways (again, he walked away from a $8.32 million salary for next year). For 11 teams, this would mean forfeiting a first round pick. For 17 teams, this would mean forfeiting a second round pick. For the Braves, this would mean forfeiting a third round pick, and for the Yankees, this would mean forfeiting a fourth round pick (because they Yankees have already signed three higher ranked free agents). Realistically, this limits his options to the Braves and Yankees, neither or whom seem to be jumping at the chance to overpay for an aging catcher. In fact the Yankees already have one aging catcher (Jorge Posada, who will also be 37 next year)

Essentially, Varitek tried to bluff the Red Sox by declining arbitration. While it is true that they would need to find another catcher if they lose Varitek, they could make a move and trade a prospect for a young catcher and then use the compensation picks to replenish their system.

The most likely scenario is that Varitek will be forced to sign a contract with the Red Sox for less than he would have received through arbitration – or he will try to sit out part of next year in hopes that a new suitor emerges.

[Update: there has been some confusion about whether or not a player can receive a pay cut through arbitration. Some sources have said that a player cannot receive a pay cut through arbitration. This is completely false. Others have said that a player can receive no more than a 20% pay cut, which is what I based this post off of. However, this only applies to players who are in pre-free agency arbitration (i.e. players who do not have the 6 years of service time necessary to be a free agent). For this group of players, they cannot receive a pay cut of more than 20% of their last year’s salary or 30% of the salary of two years previous (apparently in an attempt to avoid having teams reduce salaries 20% each year) – although this restriction is waived if the player had won a 50% pay raise in arbitration the previous year. This is outlined on page 15-16 of the CBA – article VI.F.3.c.i-ii.

However, for pending free agents, this is not applicable. Page 72 (XX.B.3) of the CBA clearly states “ … the rules concerning maximum salary reduction in article VI shall be inapplicable …”So my statement about the Red Sox having to submit an offer of $8.32 million is not correct. It appears that they could have submitted any offer of $400,000 or more ($400,000 is the minimum salary for MLB). However, this does not change my opinion that he would have received more in arbitration that he will as a free agent. It is very unusual for a player to receive a substantial pay cut in arbitration, and I think it is quite likely that he could have gotten $7-8 million (if he had been smart and submitted an amount in this range).

In a report on NESN, Varitek said that he was not aware that other teams would be required to compensate the Red Sox if they chose to sign him (effectively reducing the number of suitors). I find it absolutely incredible that he didn’t know this. Even if his agent (Scott Boras) didn’t mention this to him, you would think someone in his circle of family and friends would be aware. Perhaps he could have had a short chat with Red Sox union representative Kevin Youkilis about his options. I’ll admit that I’m geeky about free agency compensation and such, but it seems crazy that Varitek wasn’t aware of the compensation.]

The Bargain – Andruw Jones

Center fielder Andruw Jones signed a two year deal with the Dodgers worth a total of $36.2 million before the 2008 season. He then proceeded to stink up the joint, hitting just .158 with 3 homers and 14 RBI in 209 at bats. He was dreadfully bad. Then he got hurt and missed most of the season.

The fact that Jones had a bad season wasn’t a huge shock to some people. After all, his 2007 season wasn’t particularly good – he did stumble into 94 RBI, but hit just .222.

Recently, the Dodgers severed ties with Jones. They restructured his deal to pay him the remaining $22 million over the next six years, with no interest. Then they cut him. The Dodgers have a glut of outfielders on their roster and didn’t feel that Jones would be a contributor for them.

Any team that signs Jones will only have to pay him $400,000 for 2009 – the major league minimum – since his salary is being paid by the Dodgers. This seems to be an excellent reclamation project for someone. The downside is fairly small. Jones does want a major league contract (rather than a minor league contract) so it would necessitate a roster move to make room on the 40 man roster. However, it would not necessarily mean losing another player to make room – if a player still has “options” remaining, he could be optioned to the minor leagues without passing through waivers. This would, of course, use up one of the player’s three (in some cases, four) allowed option years.

The possible benefit seems worth the risk, though. Jones is only a few season removed from back to back 40 homer seasons, and he’ll be just 32 in April. His strikeout rate shot through the roof last year (1 strikeout in every 2.75 at bats, compared to one K in every 4.5 AB for his career and one K every 4.14 at bats in 2008). This may point to a problem that is more mental than physical.

In short, I would rather take a risk on Jones and be wrong (and waste an option year on a prospect) than have a division rival gamble on Jones and be right (and get 40 homers out of him). In fact, some teams have some dreadful talent (Pirates, I’m looking at you) that it would seem to be a complete no brainer of a decision.

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